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April PMI suggests slow start to Q2 for manufacturers

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Growth in the manufacturing sector slowed at the start of the second quarter of the year, latest figures have shown.

However, while rates of expansion eased for output, new orders and employment, the important CIPS Purchasing Managers Index (PMI) remained above the growth threshold.

The latest figures show the PMI fell to 53.9 in April, a 17-month low and down from 54.9 in March.

Nevertheless, it is the 21st consecutive month the PMI has indicated growth - any figure above 50 indicates expansion.

Companies reported that output was scaled up in response to higher intakes of new business, stronger client confidence, improved weather, new product launches and increased capacity. Output rose at consumer, intermediate and investment goods producers.

The slowing of growth dovetailed with a decline in business confidence to a five-month low as concerns about Brexit, trade barriers and the overall economic climate remained widespread.

The PMI report suggests that output growth will remain subdued in the coming months following a fall in backlogs of work, supply-chain constraints and rising stocks of finished goods.

April also saw new export business slow to a ten-month low. Rates of increase eased in the intermediate and investment goods sectors, but strengthened amongst consumer goods producers. Where companies reported improved demand from overseas, this was linked to higher order intakes from Europe, the United States and Asia.

Manufacturing employment increased in April but the rate of job creation eased to its weakest level for 14 months. Staffing levels were raised in the intermediate and investment goods sectors. However, the consumer goods industry saw its first job cuts since February 2017, with the rate of reduction the steepest in almost six-and-a-half years.

The rate of input price inflation remained elevated in April, despite easing to a nine-month low. Higher purchasing costs were attributed to increased commodity and raw material prices, in some cases exacerbated by demand exceeding supply. Shortages of certain inputs also led to lead times increasing.

Part of the increase in costs was passed on to clients in the form of higher selling prices in April. However, the rate of output charge inflation eased for the third straight month to the slowest since August 2017.

Rob Dobson, director at IHS Markit, which compiles the survey, said: “The start of the second quarter saw the UK manufacturing sector lose further steam. The headline PMI dipped to a 17-month low as growth of production, new business and employment all slowed.

“While adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance, making the chances of a near term hike in interest rates by the Bank of England look increasingly remote.

“On this footing, the sector is unlikely to see any improvement on the near-stagnant performance signalled by the opening quarter’s GDP numbers.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said hopes for improvement on last month had been dashed by slow order growth.

“It was left to stronger levels of export orders from Europe and the US to provide some succour to manufacturers as concerns over potential rate rises resulted in less client spending overall,” he said.

“This meant manufacturers were adrift with the highest growth of stock levels for ten months on the one hand but struggling to get key raw materials on the other. Higher demand and competition from other firms meant shortages returned to beset companies trying to cope with challenging delivery times as suppliers failed to complete.”